Amazon has agreed to pay the French government an undisclosed figure for back taxes owed between 2006 and 2010, years during which the American tech giant ran its French operations out of Luxembourg.
Following this resolution to what has been a long drawn-out tax battle that started in 2012, an Amazon spokesperson said, “all sales, charges, profits and taxes related to the retail business are now recognized in France.”
The French government had originally ordered the American company to pay close to 200 million Euros in back taxes owed.
Furthermore, as explained by Amazon, “in August 2015, we established a branch of Amazon EU Sarl in France to have the best possible organization of our activities to best serve our customers."
This subsidiary currently employs 5,500 workers and has already invested approximately 2 billion Euros in the country.
In the past, the American tech giant has been slammed by European tax authorities for avoiding its tax obligations by rerouting its sales via Luxembourg and benefiting from this jurisdiction’s generous tax break for multinational companies.
The company did reach a similar agreement in 2017 with the Italian government and coughed up close to 100 million Euros to cover for back taxes owed between 2011 and 2015.
Equalization Tax on GAFA Coming to Europe?
According to the Financial Times, France is currently at the forefront of an effort to “tax internet behemoths such as Amazon and Google based on revenues generated in EU countries,” a position that would harm “the business model of many technology groups which, under current rules, are taxed in Europe based on profits rather than total revenues.”
Alongside his counterparts in Spain, Italy and Germany, France’s Finance Minister Bruno Le Maire is pushing for Europe to implement an “equalisation tax” based on “national turnover.”
Furthermore, earlier this week, Pierre Moscovici, the EU’s Economic Affairs Commissioner, announced that towards the end of March the EU will move to “create a consensus and an electroshock" on the taxation on the digital economy.
“The idea is to be able to identify the activities of digital companies, so we need a range of indicators — the number of clicks, the number of IP addresses, advertising, and eventually revenues … and then we’ll find ways to tax them,” he said.
This initiative would affect the so-called GAFA (Google, Amazon, Facebook and Apple) group, as well as companies in the tourism sector like AirBnB and Booking.com.
More Competition on the Horizon for Amazon?
All this action also comes at a time when Chinese Internet giant JD.com has announced plans to move into France, the UK and Germany and start competing with Amazon.
As reported by the Financial Times, Richard Liu, JD’s CEO, said the company plans on entering the market in 2019 with the hopes of taking over a chunk of Amazon’s market share within “a few years.”
France will receive close to 1 billion Euros in investment from the Chinese company to set up its operations.
Liu believes his company can challenge both Amazon and Alibaba thanks to its built-in logistics network.
“Our efficiency mostly comes from the management technology of our logistics. We built our logistics to be online from day one,” said Liu.
“Companies like DHL built their systems on decades-old technology, it’s very hard for them to overturn their systems overnight.”
All translations from French are the author’s.
Main image courtesy of Hadrian / Shutterstock.com